Regulation Update
Government Cuts the Number of Luxury Goods Subject to VAT and STLG

Friday, 06 November 2020

Government Cuts the Number of Luxury Goods Subject to VAT and STLG

The government slashes the number of Taxable Goods (BKP) other than motorized vehicles which included in the luxury goods category and are subject to Value Added Tax (VAT) and Sales Tax on Luxury Goods (STLG), through Government Regulation (PP) number 61 of 2020.

This provision replaces the previous regulation, namely PP 145/2000 as amended by PP 12/2006.

With the new regulation, the number of luxury goods other than motorized vehicles that are subject to VAT and SLTG is only seven groups of goods, from previously 41 groups of goods. Thus, 35 groups of goods were excluded from the luxury goods list or about 85% of the previous amount.

Several groups of goods including luxury goods that are subject to VAT and STLG in the latest regulations include:

  1. Luxury residences such as luxury homes, apartments, condominiums, townhouses and the like (20% rate)
  2. Hot air balloon or aircraft without propulsion (40% rate)
  3. Arm cartridges except for state purposes (40% rate)
  4. Aircraft other than those for state purposes or commercial air transportation needs (50% rate)
  5. Firearms, except for state purposes (50% rate)
  6. Cruise ships, excursion boats and similar vessels (75% rate)
  7. Yachts except for state purpose and tourism transportation (75% rate)

Read: When Tax Issue Triggers Controversy over Bicycle Regulation Discourse 

Apart from slashing the number of luxury goods, the government has also changed the tariff layer scheme, by eliminating 10% and 30% VAT and STLG rates.  In the previous regulation, there were six tariff layers in effect, namely 10%, 20%, 30%, 40%, 50%, and 75%.

Change in Purchasing Power

According to the government, the cut aims to balance the tax burden between low-income and high-income people.

In addition, the government also sees that there are several groups of goods that are no longer considered luxurious due to the increase in people's purchasing power, so they must be removed from the list of goods subject to VAT and STLG.

Some examples of items that are no longer considered luxurious include beauty products, household appliances, children's toys to photographic and cinematographic devices.

Another reason for this change of rule is to boost the tourism industry, by excluding some of the industry-related goods groups from the list of luxury goods. One of them is to confirm that yachts used for tourism purposes are not subject to VAT and STLG. 

Luxury goods subject to VAT and SLTG rates of 10%:

New Regulation Old Regulation 
Not Regulated
  1. Group of heads of milk or milk that is acidified / fermented, contains added sugar or other sweeteners, or is not, scented or not, flavored or not, contains added fruit, seeds, cocoa, or not, yogurt, kephir, whey, cheese, bottled /packaged, cheese, butter or fat or oil obtained from milk, which is bottled/packaged
  2. Group of fruit-based water and vegetable-based water, which has not been fermented and does not contain alcohol, whether or not containing added sugar or other sweeteners, which is bottled/packaged, and bottled/packaged soda water.
  3. Group of drinks that do not contain alcohol, contain added sugar or other sweeteners or not, contain aroma or not, are bottled/packaged, and bottled/packaged soda water.
  4. Group of beauty products for the care of skin, hands, feet and hair, as well as other make-up preparations which are packaged/bottled
  5. Group of household appliances, coolers, heaters, automatic vending machines, including money changers and television broadcast receivers
  6. Group of The carpets and textile floor covering made of coconut fiber
  7. Group of sports equipment and supplies
  8. Group of children's toys
     

 

Luxury goods subject to VAT and STLG rates of 20%:

 

New Regulation  Old Regulation
1. Groups of luxury residences ( luxury homes, apartments, condominiums, townhouses and the like)
  1. Groups of household appliances, cooler and heater
  2. Group of sanitary wares and their equipment, except those made of plastic, zinc or cement
  3. Group of photographic and cinematographic devices, optical instruments, sound or image recording devices, sound or image reproduction devices, recording media, audio transmitters and receivers, television broadcasting receivers.
  4. Group of air conditioning machines, ironing machines, dish washing machines, driers, electromagnetic devices, shaver and haircut clippers, and musical instruments
  5. Group of Fragrance (perfumes)
  6. Group of certain carpets other than those made of coconut fibers (coir), silk, wool or fine animal fur
     

Luxury goods subject to VAT and STLG rates of 30%

 

New Regulation Old Regulation
Not Regulated 
  1. Group of ships or other water vehicles, rowboats and canoes, except for state or public transportation needs.
  2. Group of sports equipment, articles and accessories other than Group Number 1
  3. Group of television broadcasting receivers other than those subject to a 20% rate
     

Luxury goods subject to VAT and STLG rates of 40%:

New Regulation Old Regulation
  1. Group of air balloons, dirigible balloons, and other un-powered aircraft.
  2. Group of arm cartridges and other firearms except for the
    state purposes.
  1. Group of specified alcoholic drinks
  2. Group of articles made of leather or artificial leather
  3. Group of carpets made from silk
  4. Group of glassware of lead crystal of the type used for tables, kitchens, makeup, offices, or indoor decoration for similar purposes.
  5. Group of articles partly or wholly made of precious metal or metal coated with precious metal or a mixture thereof.
  6. Group of ships or other water vehicles, other than those subject to the 30% rate, except for state or public transportation needs.
  7. Group of air balloons, dirigible balloons, and other un-powered aircraft.
  8. Group of arm cartridges and other firearms except for the
    state purposes.
  9. Group of equipment for indoor games, on tables and in theme parks for adults and children
  10. Group of television broadcasting receivers
  11. Group of footwear
  12. Group of cutlery, kitchen utensils, other household items and make-up items
  13. Group of home and office furniture and fixture
  14. Group of articles made of porcelain, china clay, or ceramic.
  15. Group of articles partly or wholly made of stones, other than curb stone.

Luxury goods subject to VAT and STLG rates of 50%:

New Regulation Old Regulation
  1. Group of aircraft other than those subject to a 40% rate, except for the state or commercial air-transport purposes.
  2. Group of firearms and other arms, except for the state purposes
  1. Group of carpets made of fine animal hair
  2. Group of aircraft other than those stated is subject to a 30% rate
  3. Group of sports equipment, articles and accessories
  4. Group of firearms and other arms, except for the state purposes
  5. Group of television broadcasting receivers other than those previously regulated
     

Luxury goods subject to VAT and STLG rates of 75%:

 

New Regulation Old Regulation
  1. Cruise ships, excursion boats and similar vessels especially designed for the transport of persons, ferries of all types, except for the state or public transport needs
  2. Yachts except for state purpose, public transportation or tourism

     

 

  1. Group of alcoholic drink other than those with a 40% rate
  2. Group of articles partly or wholly made of precious stones and / or pearls or a mixture thereof
  3. Group of luxury cruisers, except for the need of the state and public transport.

 

 



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